Many food companies are reporting lagging sales in their most recent quarters. Faced with similar results, McCormick & Co. is resorting to voluntary retirements to trim its workforce.
“A large component of our streamlining actions is a U.S. voluntary retirement program, which is very far along with a targeted separation date of Feb. 1,” Chairman & CEO Lawrence Kurzius said in the company’s fourth quarter financial conference call on Jan. 26.
“This will be followed by other actions, some of which will be involuntary. As always, we will care for employees in keeping with our shared value.”
The reductions in force are part of efforts to save $75 million in fiscal 2023. “We expect our global operating effectiveness program to drive annual cost savings of approximately $125 million, of which we expect to realize $75 million through the P&L in 2023, enabling increased profit realization,” said Kurzius. “We can see the results coming through and we expect the impact to scale up as the year progresses.”
For its fiscal year that ended Nov. 30, 2022, sales increased 1% from the prior year to nearly $6.351 billion. In constant currency, sales grew 3%. Earnings per share were $2.52, compared to $2.80 in 2021. The company’s Consumer Segment for the year reported sales of $3.758 billion, down 4.6% from 2021. But the Flavor Solutions (industrial/ingredients) segment was up 9% to nearly $2.593 billion.
It was the final quarter of 2022 that brought McCormick’s numbers down, and part of the reason was foreign exchange rates. In that fourth quarter, sales declined 2% from the previous year due to a 4% unfavorable impact from currency. In constant currency, sales grew 2%, “within our implied fourth quarter guidance range, but below our expectations,” said Kurzius.
For fiscal year 2023, McCormick expects to increase sales by 5-7% and to grow operating income by 10-12%.